Creating a budget

[leftover_salmon]

As part of my ongoing process of figuring out how to not live on daddy's dime post-graduation, I've been trying to work out a monthly budget. Since you people have experience with real life, I was wondering what people thought of mine and if there's anything big I'm leaving out.

After-tax monthly salary = $4500 (I expect a decent-sized bonus in December but my plan is to budget based on salary plus a bit and put away half the bonus while keeping the rest for spending on less-regular needs, like furniture, clothes, vacations, etc...).

Rent + parking (this is already set) = $1850
Utilities = $100
Cable/PVR + high-speed internet = $150

Car insurance = $250
Gas = $150
Other parking = $75

Groceries = $200 (I like good meats and cheeses but will probably spend most weeknights at work, where dinner is paid for)
Dining out = $400
Entertainment/drinking = $400
Haircut = $25

That leaves me with $900. What else am I spending money on? Does saving $500-900/month and then saving $10-20k of bonus seem like enough?

 

[Milpool]

RETIREMENT

Health insurance, dental, vision, life insurance, disability, etc

rental insurance

rainy day savings

 

[leftover_salmon]

Originally Posted by Milpool

RETIREMENT Health insurance, dental, vision, life insurance, disability, etc rental insurance rainy day savings
Health insurance not necessary -- provided through work, plus I live in Canada, so between those two, I'm pretty well-covered for anything. Too early to start planning for retirement. I know that sounds irresponsible, but I should be making more than enough in a few years that the couple thousand I can put away now is meaningless. Besides, I already said I was socking away half of a $20-40k bonus for that and rainy days. (Also, I hate to say it, but it's true: I can probably count on inheriting a good amount of money that I can keep for retirement.) How much is rental insurance? Is that really necessary?

 

[scarphe]

mobile phone service
house cleaning service
dry cleaning service
new clothes
liquor cabinet.
taxi money( for those nights you should nto drive)
the list can continue.

your food budget is extremely high for onl eating 8-10 days at your home.
and a good rule is to only spend half of what you make, by that idea your budget needs to be changed.

 

[leftover_salmon]

Originally Posted by scarphe

mobile phone service house cleaning service dry cleaning service new clothes liquor cabinet. taxi money( for those nights you should nto drive) the list can continue. your food budget is extremely high for onl eating 8-10 days at your home. and a good rule is to only spend half of what you make, by that idea your budget needs to be changed.
No need for mobile phone as unlimited usage one is provided by work. I'm going to get Skype at home for $10/month. Don't really need a liquor "cabinet" as I don't drink much at home, but let's say that's $100/month. Mark another $60 for taxis and $30 for cleaning. Now I'm down to $700, which is still $8400 a year before my bonus. How the **** is it possible to only spend half of what ones makes, at least if they're not making high six-figures+? I always heard save 10-20%, which is what I'm doing.

 

[Milpool]

Originally Posted by leftover_salmon

Health insurance not necessary -- provided through work, plus I live in Canada, so between those two, I'm pretty well-covered for anything.

Too early to start planning for retirement. I know that sounds irresponsible, but I should be making more than enough in a few years that the couple thousand I can put away now is meaningless. Besides, I already said I was socking away half of a $20-40k bonus for that and rainy days. (Also, I hate to say it, but it's true: I can probably count on inheriting a good amount of money that I can keep for retirement.)

How much is rental insurance? Is that really necessary?

If you don't have to worry about retirement, I guess you probably don't need to worry about insuring your possessions either.

 

[OHK]

Never too early to start saving for retirement. The earlier, the better. You may not like it so much now, but when you're 70 years old and have tens of thousands of more dollars to buy golf clubs with just because a few more years of compounding, you'll be thankful. Its far from meaningless. Just a few more years over the long run makes a big difference.

 

[kwilkinson]

Originally Posted by OHK

Never too early to start saving for retirement. The earlier, the better. You may not like it so much now, but when you're 70 years old and have tens of thousands of more dollars to buy golf clubs with just because a few more years of compounding, you'll be thankful.

By the time we're 70, tens of thousands of dollars won't even buy you a pack of cigarettes.
Although by then smoking will be punishable by death, so it won't matter.

 

[scarphe]

Originally Posted by leftover_salmon

How the **** is it possible to only spend half of what ones makes, at least if they're not making high six-figures+? I always heard save 10-20%, which is what I'm doing.

i do not know the deatils of your budget so i cannot begin to say where there is fat or not. use public transport to remove the expenses related to a car, do not dine out, have a roomate et. people live on 1200 euros in milano, squeeze by on 10000 quid in london so i woul imagine living on 2250 a month is possible.

 

[leftover_salmon]

Originally Posted by Milpool

If you don't have to worry about retirement, I guess you probably don't need to worry about insuring your possessions either.

Originally Posted by OHK

Never too early to start saving for retirement. The earlier, the better. You may not like it so much now, but when you're 70 years old and have tens of thousands of more dollars to buy golf clubs with just because a few more years of compounding, you'll be thankful. Its far from meaningless. Just a few more years over the long run makes a big difference.
What are you guys missing?!? I already said I was prepared to put a little less than half of my after-tax bonus (which does NOT figure in to my monthly income/expenses) to retirement. That's $10-20k (conservatively) a year going to retirement when I'm 23 to 25. If I keep doing what I'm doing and don't **** up in life (and if I do, retirement won't be my biggest worry), I'll be putting $100k/year towards retirement before I'm 30. (I know it's early, but I don't plan on having kids.)

 

[OHK]

Originally Posted by leftover_salmon

What are you guys missing?!? I already said I was prepared to put a little less than half of my after-tax bonus (which does NOT figure in to my monthly income/expenses) to retirement. That's $10-20k (conservatively) a year going to retirement when I'm 23 to 25. If I keep doing what I'm doing and don't **** up in life (and if I do, retirement won't be my biggest worry), I'll be putting $100k/year towards retirement before I'm 30. (I know it's early, but I don't plan on having kids.)

I read that, but whatever you put into it now, you get a lot, a lot more later on since it's so early.

 

[Pennglock]

Originally Posted by leftover_salmon

I always heard save 10-20%, which is what I'm doing.

That's crazy, IMO. No doubt most people do it, though...

You are counting on your income increasing, but you may soon realize how easy it is to expand your lifestyle at the same rate. It's not just the temptation of seeing more money sitting in your payday account and wanting more toys and play- there is the subtle pressure to maintain parity within your social/business circle as they also start advancing in their careers. And if you start getting serious with a woman with certain 'needs,' that adds to it. Then there comes kids who you will obviously want to send to the best schools, and you need a big house to fit them in, in the right neighborhood of course. Memberships to clubs, charitable donations/dinners, the silly **** you need to spend money on to continue networking and earning that income.

And the above scenario is assuming you actually do dramatically increase your income in the next 15 years. What if you decide the rat-race isnt for you and pursue something less lucrative. Or maybe you find you're a bit lacking in the soft-skills needed to break into the executive suite you thought was guaranteed. There also exists the possibility of getting caught in an untimely cycle of layoffs that, though no fault of your own, can really derail your career.

Not every Ivy-league grad is making high six-figures by their mid-thirties. Save 50% of your paycheck so you can have more options down the road when you start to burn out and/or have more dependants.

 

[leftover_salmon]

Originally Posted by Pennglock

That's crazy, IMO. No doubt most people do it, though... You are counting on your income increasing, but you may soon realize how easy it is to expand your lifestyle at the same rate. It's not just the temptation of seeing more money sitting in your payday account and wanting more toys and play- there is the subtle pressure to maintain parity within your social/business circle as they also start advancing in their careers. And if you start getting serious with a woman with certain 'needs,' that adds to it. Then there comes kids who you will obviously want to send to the best schools, and you need a big house to fit them in, in the right neighborhood of course. Memberships to clubs, charitable donations/dinners, the silly **** you need to spend money on to continue networking and earning that income. And the above scenario is assuming you actually do dramatically increase your income in the next 15 years. What if you decide the rat-race isnt for you and pursue something less lucrative. Or maybe you find you're a bit lacking in the soft-skills needed to break into the executive suite you thought was guaranteed. There also exists the possibility of getting caught in an untimely cycle of layoffs that, though no fault of your own, can really derail your career. Not every Ivy-league grad is making high six-figures by their mid-thirties. Save 50% of your paycheck so you can have more options down the road when you start to burn out and/or have more dependants.
This is thoughtful criticism at least, and I've thought about a lot of it. I know it's early, but I'm pretty sure I don't want kids, ever. So that's a lot of savings there. (And no, I don't not want kids just for economic reasons.) Also, maybe you're right that I won't reach the executive suite, but if I keep my head down and work, I should be able to keep my job for at least a few years to start out, and that's a few years earning $125-250k, which should translate to ~$75-100k in retirement savings alone by age 26-28. Sure, I could top out making $500k for a few years after that before I leave or get canned for not moving up further, and not get the $1M+ I was hoping for, but by that time ~$200k+ in retirement savings would be pretty conservative (that kind of money earning 5% a year over 30 years makes a comfortable nest egg), and I'd hopefully have another $100-200k in cash and cash equivalents if I keep spending under control. I hear you on the whole rat race thing. But I've always felt it is for me (no joke, I wanted to be a corporate lawyer when I read The Firm as an 11-year old), and it's been what drives me. If that drive wanes/stops, I figure it's probably because I've completely re-evaluated my life, in which case all this -- nice cars, nice apartment, country club memberships, etc... -- goes out the window. So, with all else being equal, I'd rather keep this to more practical matters of monthly budgeting. And I can turn this around on you guys, since you seem like a more or less successful bunch in your 30s - 50s: How much were you putting away, on an absolute basis, in your 20s? Because I think the absolute dollar value is important -- if one guy makes $100k and spends $50k and saves $50k, that's better than the guy who makes $50k and saves only $30k of it, even though it is a higher percentage. So to sum up: After MONTHLY expenses, I'm left with $500-700/month in pure savings, or $6000-8500/year. Then I get a bonus of $25-50k after-tax. So that's ~$30k to $60k in the bank my first year. Depending on how much is left, I can still save $20-50k after stuff like new clothes and any other big ticket expenses I might have to make. Put this way, is that enough? Also, FWIW, my employer matches 401k up to 50%.

 

[Cior]

My financial budget is broken out like this:

Housing 35%
Transportation 15%
Debt Repayment 15%
Savings 10%
Life 25%
__________________

Total 100%

...

You can modify the figures/names for your needs. The only rule is to stick to your budget and do not fudge the numbers. ever.

Quick example : I put food costs under "Housing" and date costs under "Life". Say its the 29th and I am taking little miss hot thing out to dinner and know that my "Life" fund is dried up for the month. So I place the sink cost in "Housing" to make the budget work for the month. Slippery slope to Brokesville. Instead place the date cost in "Life" and short your budget for that category next month to get yourself back on track.

 

[dagman1]

Dude, from the get-go, drop your delusions of grandeur. I'll start by saying I am in the same field as you in Canada. I can see you drank the juice hard already. First, a bonus is called a BONUS because it is discretionary and based on performance. It's not an entitlement so you can't plan on getting it. Second, you can plan all you want about making 250K or 500K or whatever, but just because you landed a summer a big firm doesn't mean that it's going to happen. You might will be asked to leave at some point or even just hate your job and want to leave. Thirdly, you might say you don't want kids now, but you are really young. You don't even have a clue about what you want. Someday you will likely get married and your preference (or your wife's) will be to have kids. You need to start saving either for retirement, for unforeseen life circumstances, or even just to have freedom of choice in your life. You are making a good salary and should be able to put away 20% of your income. You obviously don't understand the power of compound interest: http://www.mindyourfinances.com/mone...ings/081104-04 Forgive me but you are being pretty naive here. It's okay to be confident but in your case it approaches arrogance.